Corvinus University of Budapest, Department of Environmental Economics and Technology, Fővám tér 8., 1093, HUNGARY
E-mail: krajnyikzs@hotmail.com
Abstract: The objective of this paper is to show the possibilities of the monetary valuation of natural resources in Slovakia. In our study we use Choice Experiment method - which is a very important tool for valuing non-market or environmental goods - to estimate the people's willingness to pay for the protection and development of Baradla-Domica cave system. We introduce the results of the face-to-face survey carried out in Slovakia, and sum up the conclusions of the study.
I. INTRODUCTION
The methods of valuation of environmental or non-market goods have become crucial when determining the costs and benefits of public projects.
The valuation studies have been applied in many different areas, such as: health-, transport- or environmental economics. There exists a range of valuation methods to estimate non-market costs and benefits [2], [9], [15].
In our case we applied one of the stated preference methods, the so-called Choice Experiment (CE) method, in order to estimate the value of the benefits related to the protection and development of Baradla-Domica cave system by carrying out a citizens' survey in Slovakia8. The change in the quality of the cave system should be expressed in monetary terms in case if we want to compare different programs by using cost and benefit analysis. In addition the protection and development of natural formations must be an obligation for every country.
The reminder of this paper is organized as follows. Part II. sets out the basic methodology and the choice experiment approach. Part III. is a brief description of the evaluated good. In part IV. we discuss the steps in the design of the study. Part V.
presents the survey, while part VI. introduces the results. Conclusions of the study are summed up in part VII.
II. METHODOLOGY
The use of stated preference methods has come into prominence for the last two decades among the methods for monetary valuation of environmental goods. There are more explanations for this. On the
8 The same survey has been carried out in Hungary as well, but due to size limitations of this paper we will introduce only the results of the Slovakian survey.
one hand, they can capture not only the use values but also the non-use values of _ certain goods and on the other hand, creating hypothetic markets makes them possible to determine different preferences. [4], [15], [17].
Stated preference techniques include a range of methods which take a similar approach to valuing natural resources or other environmental goods.
Each method measures different preferences of the individuals regarding environmental goods. That can be revealed by classifying, ranking, choosing or comparing alternatives determined in advance [4], [6], [7], [14].
A common feature of these methods is that they create a non-existing market with the help of questionnaires and try to directly or indirectly understand through those how individuals value environmental goods or a change in them, in money term.
Choice Experiment is one example of stated preference methods to environmental valuation, since it involves eliciting responses from individuals in constructed, hypothetical markets, rather than the study of actual behavior [8], [14].
We have chosen the Choice Experiment method to estimate the value of protection and development of Baradla-Domica cave system for several reasons.
They are the following:
- it is becoming ever more frequently applied in monetary valuation of environmental goods [3],
- it has the most comprehensive and professional literature among the stated preference methods,
- its scientific role and acceptance increase as well [3], [4],
- it is able to capture and estimate the non-use values, which are also significant in the case of cave systems, and
- has never been applied in Slovakia before.
The Choice Experiment method was initially developed by Louviere and Henscher [11] and Louviere and Woodworth [12]. The method is based around the theory that any natural resource or non-market good can be described in terms of its attributes and the levels that these take. Using CE the individuals are given a hypothetical setting and asked to choose their preferred alternative among
several alternatives in a choice set. A monetary value is included as one of the attributes, along with other attributes of importance. When individuals make their choice, at the same time they make trade-offs between the levels of the attributes in the different alternatives presented in a choice set. Thus, it is possible to estimate respondents’ willingness to pay[2], [7], [15].
According to the framework of the random utility theory the indirect utility function for each respondent i (Ui) can be decomposed into two parts:
a deterministic element (V), which is typically specified as a linear index of attributes (X) of the j different alternatives in the choice set, and a stochastic element (e), which represents unobservable influences on individual choice [8], [16]:
Uij = Vij (Xij) + eij = bXij + eij (1)
Initially the CE method was applied in transport economy and in market research where the trade-off between the certain transports projects and the individual goods was examined. Further on it spread in health economy [4], [7].
The CE method was first applied to evaluate environmental goods by Adamowicz et al. in 1994 to value the benefits of the water recreation [2], [14], [15]. Later it became _ wide-spread and it has been applied for valuation of different environmental goods in order to underpin that it can be applied successfully in many areas of environmental economics [7]9.
It is worth mentioning that according to our best knowledge the Choice Experiment method has never been applied for the valuation of cave systems.
III. THE EVALUATED GOOD
The Baradla-Domica cave system10 is one of the longest and the most significant stalactite cave system not only in Hungary and Slovakia, but also in Europe. The total length of the cave system is about 25 km, three quarters of it is situated in Hungary and known under the name Baradla, and one quarter of it is situated in Slovakia, known as Domica. The Baradla is on the territory of National Park of Aggtelek, and the Domica cave is on the territory of National Park of Slovak Karst [5], [19], [20]. Figure 1. shows the geographical location of the caves.
9 For the review of selected studies see: Hanley, N., S. Mourato and R. Wright, 2001.
10 Cave systems are considered unique formations of nature, any harm caused to them cannot usually be restored. In this sense the cave systems opened to the public are damaged formations to a certain extent.
FIGURE 1:THE GEOGRAPHICAL LOCATION OF THE CAVES
The cave system has been listed on the World Cultural and Natural Heritage site since 199511 and on the Ramsar site since 200112. While the Baradla cave is the most visited cave in Hungary, the Domica cave is primarily known only in the eastern part of Slovakia. For the visitors the greatest experience in these caves is the extraordinary colorfulness of dripstone formations (see Figure. 2.), but its flora and fauna is also very significant [5], [19], [20].
In the passages of the Domica nearly 160, while in the Baradla 450 animal species have been identified, most of which are diminutive and hardly identifiable creatures. There are lots of species which are remarkable because they are only known from the Baradla and Domica. These are for example mosses, ferns, crabs and unique bats [5], [10], [20], [21].
In addition to the touring possibilities the so-called “Concert Hall” is suitable for organizing different cultural programs, as music concerts, presentations or wedding ceremonies [1].
We think the protection of all natural formations of World Cultural and Natural Heritage sites, in our case the Baradla-Domica cave system must be an obligation for every country.
FIGURE2:THE "ROME BATHS" FORMATION IN THE DOMICA CAVE
11 Until 1995 only two caves, the Mammoth Cave, Kentucky, USA, and the Skocjan Cave, Slovenia, have been declared World Heritage Sites [19].
12 The area represents a unique natural value, the first internationally recognised transboundary subterranean wetland of Hungary and Slovakia.
IV. STUDY DESIGN
One main focus of this study was to estimate the people's willingness to pay for the protection and development of Baradla-Domica cave system. After we determined the topic of the research, the initial steps in this study were to identify the relevant choice attributes and their levels.
Identifying the set of attributes and the levels these take is a key phase in Choice Experiment design, because they have to meet a number of requirements. These are that they are:
- relevant to the problem being analyzed, - realistic,
- capable of being understood by the sample population, and
- of applicability to policy analysis [4], [8].
In order to choose the relevant attributes and meet the above mentioned requirements we conducted a number of interviews with experts and a pilot survey with the local residents.
All this information provided help to determine the most valid attributes and its levels. Four attributes were established in order to estimate the value of the benefits related to the protection and development of the cave system. These are following:
Protection of flora and fauna.
This attribute refers to the protection of the species of the flora and fauna living in the cave. The hypothesis is that higher protection is preferred to lower protection of these species. The attribute has two levels: (low and high).
Protection of dripstone formations.
This refers to the protection of the unique natural dripstone formations in the cave in order to keep up their existence for the future generations for a long term period. Our hypothesis is that higher protection is preferred to lower protection of dripstone formations. There are two levels: (low and high).
Improvement of cultural and touring services.
This attribute refers to the improvement of cultural and touring services by providing more or less touring possibilities and organizing cultural programs (concerts, presentations, wedding ceremonies etc.) in the cave. This attribute also has two levels: (low and high).
Raised entry fee. This attribute is the so called ”price attribute” and is used to estimate indirectly the people's willingness to pay for the different types of protection/development programs (choice sets). The attribute has four levels: 200 SKK, 240 SKK, 300 SKK and 400 SKK13.
The first three attributes are the main indicators of the condition of the caves which ordinary people see as important, but which are also consistent with
13 The actual entry fee during the survey to the Domica cave was 160 SKK.
1 EUR = 30.126 SKK (recently)
the cave regulator’s expectations. Regarding the price attribute, during the pilot survey the general public accepted the idea that protection/improvement had to be paid for, and raised entry fees were viewed as a realistic payment mechanism.
Once the attributes and its levels were determined, SPSS econometric software was used to create choice profiles, which were then combined to make up the choice sets used in Choice Experiment.
An example choice card (set) is given in Table 1.
Due to the simple nature of the design, blocking was not necessary. The combination of attributes and their respective levels was created using an orthogonal design procedure. After this procedure, the questionnaire was constructed.
TABLE 1:AN EXAMPLE CHOICE CARD
Attributes Option A Option B Neither Protection of flora
and fauna
low low
Protection of dripstone formations
low high
Improvement of touring and cultural services
Raised entry fee 200 SKK
We carried out a face-to-face survey mainly among the local residents and several tourists as well. The reason for this was that the visitors are coming mainly from the region of Kosice within a range of about 50-80 km from the cave14, and this group could have the most benefit from the protection/development of the cave. During the survey we tried to keep two aspects of the representatives. These were the gender and the educational qualification15. In the survey the simple random sample strategy was used, which is generally a reasonable choice.
First, we presented the hypothetical scenarios related to the condition of the cave system and explained what would happen to the caves in the cases of implementation and of non-realization of the protection/development program. The future effects which people were asked to value were: the protection of dripstone formations; the protection of flora and fauna; and the improvement of touring and cultural services. We also explained that any level of protection/development would cost them extra money (raised entry fee).
14 Personnal communication of Lőrincz Ottó, the director and the touring guide of Domica cave.
15 We performed χ2-test in order to check the representativity.
Unfortunately the sample is representative only in the distribution of the adult population by gender. Other variables are not representative.
Four choice sets were then presented to each respondent and the survey participants were requested to choose their most preferred option.
Each choice set consisted three-way choice (see Table 1.):
Option A and option B, which gave a protection or/and improvement in at least one attribute for a raised entry fee. A third option of choosing "neither"
was also given. This "neither" option, commonly called "status quo", stated there would not be increase in entry fee, but no certain protection or/and improvement would be realized in the future.
One hundred and seventy-six interviews were accomplished altogether in the winter of 2008.
VI. RESULTS
Responses from Choice Experiments are analyzed using logit or probit models. Due to the simple nature of the study, we used a simple Multinomial logit model (MNL) for the estimation, according to random utility theory. This model can be estimated by conventional maximum likelihood procedures using econometric software such as STATA or LIMDEP [8], [13].
In our case a STATA version 10. econometric software was used to estimate the MNL model16. Attributes were coded using dummy variables.
Estimating according to equation (1) the results for 176 respondents from the MNL model are shown in Table. 2.
TABLE 2:MULTINOMIAL LOGIT MODEL RESULTS Choice Coef. P>|z| [95% Conf. Interval]
Fee -.0048155 0.000 -.0065378 -.0030932 Flora 1.248205 0.000 1.02379 1.47262
Stone 1.817986 0.000 1.578362.057612
Serv .1503397 0.224 -.0920457 .3927252
Number of obs = 2112 LR chi2(4) = 385.33 Prob > chi2 = 0.0000 Log likelihood = -1151.652 Pseudo R2 = 0.1433
Fee – raised entry fee
Flora – protection of flora and fauna
Stone – protection of dripstone formations Serv – improvement of touring and cultural services
The signs of all attributes are positive (except the
"fee" attribute), as consumer preference theory predicts, as these attributes are coded to show an increase in the protection/development of the cave which should lead to increase utility. The "fee" (as price attribute) is negative and therefore also in accord with standard economic theory.
As may be seen, two attributes, namely the protection of dripstone formations (Stone) and the protection of flora and fauna (Flora) are the main determinants of choices for, and their coefficients
16 We wish to thank to the Department of Environmental Economics and Technology, Budapest University of Corvinus for using the STATA software and also thank Marjainé Szerényi Zsuzsanna, Ph.D. for her helpful assistance.
have a high positive value and are statistically significant. It means, people can be seen to prefer the
"high" level of these attributes. The attribute of improvement of touring and cultural services (Serv) has also a positive sign, but its value is much lower compared to previously mentioned attributes, and is statistically not significant.
The value of a marginal change in any of the attributes can be obtained by dividing the estimated coefficient on that attribute by the coefficient on price [4], [8], according to equation (2) where βATT is the coefficient on any of the attributes and βFEE is the coefficient of the cost attribute:
FEE
For example, for a change in the protection of dripstone formations of Baradla-Domica cave system the willingness to pay is equal to (1.817/-0.0048).
The WTP were calculated for each of the attributes by applying equation (2) and the results are given in Table 3.
TABLE 3:WTP RESULTS
(N = 176) WTP (SKK)
Protection of flora and fauna 259
Protection of dripstone formations 378
Improvement of touring and cultural services 31 Total 668
The actual entry fee (2008.january) 160
WTP total 508
1 EUR=30.126 SKK
The result shows that the total willingness to pay for the protection and development of Baradla-Domica cave system is 508 SKK per person for one entry, which is 0,386 % of their average annual income17. As we predicted, the most important for the people is the protection of dripstone formations and the protection of flora and fauna. Their WTP values are much higher than the WTP for the improvement of touring and cultural services.
After we determined the WTP per person, we also made the aggregation of the results of the willingness to pay18. We assume that the participants of the survey represent those who are concerned in the aggregation (population of Slovakia).
Although, we carried out the survey only in the region of Kosice, we considered the complete population of Slovakia as concerned, because the Baradla-Domica cave system is a unique natural formation in the world and the Domica cave is of national importance as well, therefore its protection is important for the whole population.
17 In order to test the confidence of the results we performed the estimation by using a Conditional logit model as well. The total WTP result was close to MNL result, 477 SKK/person/entry.
18 We found interesting to perform the aggregation, despite not having achieved the representativeness of our sample, which is ought to be important at the aggregation.
According to the analysis of the willingness to pay we found out that those people who have already visited the cave (users) are willing to pay a slightly higher entry fee for the protection and development program than those who have no intention to visit the cave in the near future and whose intention is not sure (non-users). In other words, the non-users of the cave offered on average 94 % of the willingness to pay of the users. It means in the aggregation for other regions we used 477 SKK (non-users), while for the region of Kosice 508 SKK, since the majority of the visitors come from this region (users).
Taking into account these factors, we received the aggregated results given in Table 4.
TABLE 4:AGGREGATED WTP RESULTS19
Region of Kosice 596 200 302,9
Other regions 3 614 868 1 724,3
Slovakia 4 211 068 2 027,2
It can be seen that the protection and development of Baradla-Domica cave system is notably high, 2.03 milliard SKK even on the basis of the most cautious estimation.
VII. CONCLUSION
The main purpose of this study was to measure the people's willingness to pay for the different types of protection/development programs of the Baradla-Domica cave system. In order to investigate this, we used the Choice Experiment method, as one of the stated preference techniques for valuing environmental goods.
The future effects on the condition of the cave system which people were asked to value were: the protection of dripstone formations; the protection of flora and fauna; and the improvement of touring and cultural services.
A broad conclusion is that the Choice Experiment approach succeeded in this case, and - with some limitations - can be applied for the valuation of caves.
The result shows that the majority of the
The result shows that the majority of the